Question

Suppose the market for smartphones in Australia is oligopolistic with three firms owning the entire market: Apple, Samsung and Google.

(a) Suppose all the products are unbranded (homogeneous) and all three firms have similar cost functions. What would be the best outcome for consumers in this market and what is the best outcome for the three oligopolists? Which one is the efficient outcome?

(b) Suppose Apple can differentiate its smartphone by using a different operating system than the other two firms. This would increase the marginal cost of Apple to a point above the other two firms. How would your answers to part (a) change?

(c) Suppose all three firms have different cost functions and heterogeneous products. What would be the predicted outcome in this case?

Answer 1

a,customer get wide varieties of selection,when the prices are similar customers can trust any of the product.three oligopolists benefits : market competition decrease,when the products are appeared with different brands then,each company needs to consider market price,specification of product etc.that's why their is no worry for the firms to do buisness.due to the reduction of market competition all the product get same value,this would help to balance the trade.these are the reasons while there is no confusion in customer thought process to look product,this helpes good economic maintanence. b,when products are homogenous and same prication their is no worry for a wider market competition.here firm apple added an additional operating system called ios,this operating system have more specifications than other two android system.they are smoother and faster than other operating system.buisness officials,officers,editors and other technical users are preferred for ios system to accompolish their needs.when an additional system added generally it's marginal prce and demand get increases. c,when all the three firms have different cost and heterogenous. then market competition can take place.this calculates branding in market.for an example: the apple mac book has different price compared to samsung laptop,also these two have different price with google products.according to the specification of a product customer prefer each product according to their utitily or purpose.here customer didn't consider price of the product.the economic outcome is according to the demand of customer .